EX-99.1 2 a991earningsrelease-6302022.htm EX-99.1 Document

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Tyler Technologies Reports Earnings for Second Quarter 2022
Total revenues grew 16.0% driven by 28.2% growth in subscriptions
PLANO, Texas – July 27, 2022 – Tyler Technologies, Inc. (NYSE: TYL) today announced financial results for the second quarter ended June 30, 2022.
Second Quarter 2022 Financial Highlights:
•Both GAAP and non-GAAP total revenues were $468.7 million, up 16.0% from $404.1 million and 15.6% from $405.4 million, respectively, for the second quarter of 2021. On an organic basis (excluding COVID-related revenues), GAAP revenues grew 6.2% and non-GAAP revenues grew 5.8%.
•Recurring revenues from maintenance and subscriptions were $372.6 million, up 16.7% from $319.2 million for the second quarter of 2021, and comprised 79.5% of second quarter 2022 revenue, up from 79.0% for the second quarter of 2021. On an organic basis (excluding COVID-related revenues), recurring revenues were $331.4 million, up 7.7%.
•Subscription revenue and software services revenue included a total of $15.2 million from NIC's COVID-related initiatives. Revenues from TourHealth concluded in the second quarter, and revenues from the Virginia rent relief program are expected to wind down in the third quarter.
•Operating income was $56.8 million, up 48.2% from $38.3 million for the second quarter of 2021. Non-GAAP operating income was $110.6 million, up 3.0% from $107.4 million for the second quarter of 2021.
•Net income was $39.9 million, or $0.94 per diluted share, up 56.5% from $25.5 million, or $0.61 per diluted share, for the second quarter of 2021. Non-GAAP net income was $79.5 million, or $1.88 per diluted share, up 2.9% from $77.2 million, or $1.83 per diluted share, for the second quarter of 2021.
•Cash flows from operations were $76.7 million compared to negative $20.3 million for the second quarter of 2021. Free cash flow was $60.0 million compared to negative $33.5 million for the second quarter of 2021.
•Adjusted EBITDA was $119.0 million, up 3.8% from $114.7 million for the second quarter of 2021.
•Software subscription arrangements comprised approximately 74% of the total new software contract value for the second quarter, compared to approximately 65% for the second quarter of 2021.
•Software subscription bookings for the second quarter added $27.6 million in annual recurring revenue.
•Annualized non-GAAP recurring revenue (ARR) was $1.49 billion, up 16.3% from $1.28 billion for the second quarter of 2021.
•Total backlog was $1.85 billion, up 13.9% from $1.63 billion at June 30, 2021.


Tyler Technologies Reports Earnings
For Second Quarter 2022
July 27, 2022
Page 2
“Our market conditions remain strong, reflected by request for proposal and demo activities that continue to trend positively," said Lynn Moore, Tyler's president and chief executive officer. Total revenues grew approximately 16.0%, with organic revenue growth of 6.2%. Subscription revenues grew 28.2% in total and 14.1% organically, marking our 66th consecutive quarter of double-digit subscription revenue growth. Services revenues were flat on an organic basis, as we work to grow our implementation teams to support our growing backlog and anticipated continued sales growth.
"Our NIC division continued to exhibit strength in the second quarter, with core revenue growth of 8%, excluding COVID-related revenues, which we expect to end in the third quarter. Our enthusiasm around cross-sell opportunities with NIC remains high, and the pipeline of those opportunities doubled this quarter.
"Cash flows from operations and free cash flow were both robust at $76.7 million and $60.0 million, respectively. As interest rates continue to rise, we're prioritizing the use of excess cash to aggressively reduce debt, while maintaining flexibility to take advantage of opportunities to pursue strategic acquisitions and investments that provide long-term value.
"Our strong competitive position and the active public sector market resulted in robust second quarter bookings of approximately $562 million, which grew 21% over last year. Excluding NIC, bookings grew 16%. For the trailing twelve months, bookings were approximately $2.0 billion, up 53%, and excluding NIC, were approximately $1.5 billion, growing 21%.
"Subscription agreements comprised 74% of our new software contract value this quarter, as we continue to see an acceleration in the shift of our new contract mix from license to SaaS. In addition, the number of clients converting from on-premises to SaaS reached a new high of 96 in the second quarter. As expected, margins compressed compared to the second quarter of 2021, reflecting changes in revenue mix and costs related to our accelerated transition to the cloud.
"We're pleased with our results for the first half of 2022 and remain confident in our ability to perform at a high level even against a challenging macroeconomic backdrop. That confidence is driven by the unique characteristics of the public sector market, the durability of our business model, and the reliability of our growing recurring revenues from providing mission-critical solutions to our clients.
"While our revenue and operating margin expectations for the full year have not changed, we have adjusted our earnings guidance to reflect changes in our assumptions around interest expense, given current expectations for interest rate hikes and accelerated non-cash amortization of debt discounts and issuance costs associated with our prepayment of debt," concluded Moore.
Guidance for 2022
As of July 27, 2022, Tyler Technologies is providing the following guidance for the full year 2022:
•GAAP and non-GAAP total revenues are both expected to be in the range of $1.835 billion to $1.870 billion.
•Total revenues are expected to include approximately $44 million of COVID-related revenues from NIC's TourHealth and rent relief services. Revenues from TourHealth concluded in the second quarter, while revenues from the rent relief program are expected to wind down in the third quarter.
•GAAP diluted earnings per share are expected to be in the range of $3.60 to $3.76 and may vary significantly due to the impact of stock incentive awards on the GAAP effective tax rate.


Tyler Technologies Reports Earnings
For Second Quarter 2022
July 27, 2022
Page 3
•Non-GAAP diluted earnings per share are expected to be in the range of $7.36 to $7.52.
•Interest expense is expected to be approximately $30 million, including approximately $7.5 million of non-cash amortization of debt discounts and issuance costs. This represents an increase of approximately $7 million compared to our previous guidance, based on current expectations for rate hikes and accelerated non-cash amortization of debt discounts and issuance costs associated with debt repayments, with an impact on both GAAP and non-GAAP diluted earnings per share of approximately $0.12 per share.
•Pretax non-cash, share-based compensation expense is expected to be approximately $107 million.
•Research and development expense is expected to be in the range of $98 million to $101 million.
•Fully diluted shares for the year are expected to be in the range of 42.4 million to 42.8 million shares.
•GAAP earnings per share assumes an estimated annual effective tax rate of approximately 22.0% after discrete tax items, including approximately $8 million of discrete tax benefits related to share-based compensation.
•The non-GAAP annual effective tax rate is expected to be 24%.
•Capital expenditures are expected to be in the range of $58 million to $62 million, including approximately $34 million of capitalized software development costs. Total depreciation and amortization expense is expected to be approximately $144 million, including approximately $109 million from amortization of acquisition intangibles.
GAAP to non-GAAP guidance reconciliation
Non-GAAP diluted earnings per share excludes the estimated full-year impact of non-cash share-based compensation expense and employer portion of payroll tax related to employee stock transactions of approximately $107 million, amortization of acquired software and intangible assets of approximately $109 million, and acquisition-related costs of approximately $1 million. Additionally, the non-GAAP tax rate of 24% is estimated periodically as described below under "Non-GAAP Financial Measures" and excludes approximately $8 million of estimated discrete tax benefits that are included in the GAAP estimated annual effective tax rate.
Conference Call
Tyler Technologies will hold a conference call on Thursday, July 28, 2022 at 10:00 a.m. ET to discuss the company’s results. The company is offering participants the opportunity to register in advance for the conference through the following link: https://conferencingportals.com/event/dXimaDxA. Registered participants will receive an email with a calendar reminder and dial-in number and PIN that will allow them to listen to the call live.
Participants who do not wish to pre-register for the call may dial in using 888-330-2506 (U.S.and Canada callers) or 240-789-2712 (international callers) and ask for the “Tyler Technologies” call. The live audio webcast and archived replay can also be accessed at http://investors.tylertech.com/Presentations.


Tyler Technologies Reports Earnings
For Second Quarter 2022
July 27, 2022
Page 4
About Tyler Technologies, Inc.
Tyler Technologies (NYSE: TYL) provides integrated software and technology services to the public sector. Tyler's end-to-end solutions empower local, state, and federal government entities to operate more efficiently and connect more transparently with their constituents and with each other. By connecting data and processes across disparate systems, Tyler's solutions are transforming how clients gain actionable insights that solve problems in their communities. Tyler has more than 37,000 successful installations across more than 12,000 locations, with clients in all 50 states, Canada, the Caribbean, Australia, and other international locations. Tyler has been recognized numerous times for growth and innovation, including Government Technology's GovTech 100 list and Forbes' "Most Innovative Growth Companies" list. More information about Tyler Technologies, an S&P 500 company headquartered in Plano, Texas, can be found at tylertech.com.
Non-GAAP Financial Measures
Tyler Technologies has provided in this press release financial measures that have not been prepared in accordance with generally accepted accounting principles (GAAP) and are therefore considered non-GAAP financial measures. This information includes non-GAAP revenues, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP earnings per diluted share, EBITDA, adjusted EBITDA, and free cash flow. We use these non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating Tyler’s ongoing operational performance because they provide additional insight in comparing results from period to period. Tyler believes the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial results with other companies in our industry, many of which present similar non-GAAP financial measures. Non-GAAP financial measures discussed above exclude write-downs of acquisition-related deferred revenue, share-based compensation expense, employer portion of payroll taxes on employee stock transactions, expenses associated with amortization of intangibles arising from business combinations, and acquisition-related expenses.
Tyler currently uses a non-GAAP tax rate of 24%. This rate is based on Tyler's estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating Tyler's non-GAAP income, as well as significant non-recurring tax adjustments. The non-GAAP tax rate used in future periods will be reviewed periodically to determine whether it remains appropriate in consideration of factors including Tyler's periodic annual effective tax rate calculated in accordance with GAAP, changes resulting from tax legislation, changes in the geographic mix of revenues and expenses, and other factors deemed significant. Due to differences in tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to Tyler's estimated annual tax rate as described above, the estimated tax rate on non-GAAP income may differ from the GAAP tax rate and from Tyler's actual tax liabilities.
Non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial information prepared in accordance with GAAP. The non-GAAP measures used by Tyler Technologies may be different from non-GAAP measures used by other companies. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, which has been provided in the financial statement tables included below in this press release.


Tyler Technologies Reports Earnings
For Second Quarter 2022
July 27, 2022
Page 5
Forward-looking Statements
This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical in nature and typically address future or anticipated events, trends, expectations or beliefs with respect to our financial condition, results of operations or business. Forward-looking statements often contain words such as “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates,” “plans,” “intends,” “continues,” “may,” “will,” “should,” “projects,” “might,” “could” or other similar words or phrases. Similarly, statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. We believe there is a reasonable basis for our forward-looking statements, but they are inherently subject to risks and uncertainties and actual results could differ materially from the expectations and beliefs reflected in the forward-looking statements. We presently consider the following to be among the important factors that could cause actual results to differ materially from our expectations and beliefs: (1) the effects of the COVID-19 pandemic, including its potential effects on the economic environment, our customers and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic; (2) changes in the budgets or regulatory environments of our clients, primarily local and state governments, that could negatively impact information technology spending; (3) disruption to our business and harm to our competitive position resulting from cyber-attacks and security vulnerabilities; (4) our ability to protect client information from security breaches and provide uninterrupted operations of data centers; (5) our ability to achieve growth or operational synergies through the integration of acquired businesses, while avoiding unanticipated costs and disruptions to existing operations; (6) material portions of our business require the Internet infrastructure to be adequately maintained; (7) our ability to achieve our financial forecasts due to various factors, including project delays by our clients, reductions in transaction size, fewer transactions, delays in delivery of new products or releases or a decline in our renewal rates for service agreements; (8) general economic, political and market conditions, including inflation and increases in interest rates; (9) technological and market risks associated with the development of new products or services or of new versions of existing or acquired products or services; (10) competition in the industry in which we conduct business and the impact of competition on pricing, client retention and pressure for new products or services; (11) the ability to attract and retain qualified personnel and dealing with the loss or retirement of key members of management or other key personnel; and (12) costs of compliance and any failure to comply with government and stock exchange regulations. These factors and other risks that affect our business are described in our filings with the Securities and Exchange Commission, including the detailed “Risk Factors” contained in our most recent annual report on Form 10-K and quarterly report on Form 10-Q. We expressly disclaim any obligation to publicly update or revise our forward-looking statements.
(Comparative results follow)
Contact: Brian K. Miller
Executive Vice President & CFO
Tyler Technologies, Inc.
972-713-3720
brian.miller@tylertech.com
22-36


TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)


Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Software licenses and royalties$15,009 $17,604 $31,515 $32,537 
Subscriptions255,816 199,558 501,259 302,037 
Software services63,125 53,337 124,622 100,977 
Maintenance116,815 119,621 233,844 238,733 
Appraisal services8,812 6,265 17,330 12,730 
Hardware and other9,108 7,690 16,222 11,863 
Total revenues468,685 404,075 924,792 698,877 
Software licenses and royalties2,869 1,368 5,478 2,604 
Amortization of acquired software14,039 11,823 27,260 19,787 
Subscriptions, software services and maintenance244,192 199,771 481,088 334,091 
Appraisal services5,976 4,429 11,912 9,046 
Hardware and other8,161 4,623 13,188 7,081 
Total cost of revenues275,237 222,014 538,926 372,609 
  Gross profit193,448 182,061 385,866 326,268 
Selling, general and administrative expenses99,701 108,922 197,596 187,696 
Research and development expense23,386 23,428 47,327 45,241 
Amortization of customer and trade name intangibles13,604 11,420 28,318 16,832 
  Operating income56,757 38,291 112,625 76,499 
Interest expense(6,214)(12,437)(11,018)(12,915)
Other income, net216 238 581 804 
Income before income taxes50,759 26,092 102,188 64,388 
Income tax provision10,813 562 22,258 1,882 
Net income$39,946 $25,530 $79,930 $62,506 
Earnings per common share:
   Basic$0.96 $0.63 $1.93 $1.53 
   Diluted$0.94 $0.61 $1.88 $1.48 
Weighted average common shares outstanding:
   Basic41,500 40,765 41,499 40,761 
   Diluted42,321 42,094 42,449 42,148 



TYLER TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except per share data)
(Unaudited)
 


Three Months Ended June 30,Six Months Ended June 30,
Reconciliation of non-GAAP total revenues2022202120222021
GAAP total revenues$468,685$404,075$924,792$698,877
Non-GAAP adjustments:
  Add: Write-downs of acquisition-related deferred revenue—1,288—1,288
Non-GAAP total revenues$468,685$405,363$924,792$700,165

Three Months Ended June 30,Six Months Ended June 30,
Reconciliation of non-GAAP gross profit and margin2022202120222021
GAAP gross profit$193,448$182,061$385,866$326,268
Non-GAAP adjustments:
  Add: Write-downs of acquisition-related deferred revenue—1,288—1,288
  Add: Share-based compensation expense included in cost of
           revenues		6,8675,90913,63910,909
  Add: Amortization of acquired software14,03911,82327,26019,787
Non-GAAP gross profit$214,354$201,081$426,765$358,252
GAAP gross margin41.3 %45.1 %41.7 %46.7 %
Non-GAAP gross margin45.7 %49.6 %46.1 %51.2 %

Three Months Ended June 30,Six Months Ended June 30,
Reconciliation of non-GAAP operating income and margin2022202120222021
GAAP operating income$56,757$38,291$112,625$76,499
Non-GAAP adjustments:
  Add: Write-downs of acquisition-related deferred revenue—1,288—1,288
  Add: Share-based compensation expense25,80025,17551,07950,899
  Add: Employer portion of payroll tax related to employee stock
           transactions		3983931,1101,160
  Add: Acquisition related costs—19,0171,03119,830
  Add: Amortization of acquired software14,03911,82327,26019,787
  Add: Amortization of customer and trade name intangibles13,60411,42028,31816,832
Non-GAAP adjustments subtotal53,84169,116108,798109,796
Non-GAAP operating income$110,598$107,407$221,423$186,295
GAAP operating margin12.1 %9.5 %12.2 %10.9 %
Non-GAAP operating margin23.6 %26.5 %23.9 %26.6 %



TYLER TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except per share data)
(Unaudited)
 

Three Months Ended June 30,Six Months Ended June 30,
Reconciliation of non-GAAP net income and earnings per share2022202120222021
GAAP net income$39,946$25,530$79,930$62,506
Non-GAAP adjustments:
  Add: Total non-GAAP adjustments to operating income53,84169,116108,798109,796
  Add: Acquisition related costs in interest expense—6,407—6,407
  Less: Tax impact related to non-GAAP adjustments(14,290)(23,826)(28,378)(41,460)
Non-GAAP net income$79,497$77,227$160,350$137,249
GAAP earnings per diluted share$0.94$0.61$1.88$1.48
Non-GAAP earnings per diluted share$1.88$1.83$3.78$3.26

Three Months Ended June 30,Six Months Ended June 30,
Detail of share-based compensation expense2022202120222021
Subscriptions, software services and maintenance$6,867$5,909$13,639$10,909
Selling, general and administrative expenses18,93319,26637,44039,990
Total share-based compensation expense$25,800$25,175$51,079$50,899

Three Months Ended June 30,Six Months Ended June 30,
Reconciliation of EBITDA and adjusted EBITDA2022202120222021
GAAP net income$39,946$25,530$79,930$62,506
Amortization of customer and trade name intangibles13,60411,42028,31816,832
Depreciation and amortization included in cost of revenues, SG&A and other expenses22,68119,24844,61634,178
Amortization of debt discounts and issuance costs included in interest expense1,1398,7062,2718,950
Interest expense5,0663,7328,7473,966
Income tax provision (benefit)10,81356222,2581,882
EBITDA$93,249$69,198$186,139$128,314
Write-downs of acquisition-related deferred revenue—1,288—1,288
Share-based compensation expense25,80025,17551,07950,899
Acquisition related costs—19,0171,03119,830
Adjusted EBITDA$119,049$114,678$238,249$200,331

Three Months Ended June 30,Six Months Ended June 30,
Reconciliation of free cash flow2022202120222021
Net cash provided by operating activities$76,679 $(20,347)$130,220 $51,356 
Less: additions to property and equipment(8,178)(7,659)(12,757)(14,223)
Less: capitalized software development costs(8,516)(5,471)(16,463)(8,947)
Free cash flow$59,985 $(33,477)$101,000 $28,186 


TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
 (Unaudited)

June 30, 2022December 31, 2021
ASSETS
Current assets:
     Cash and cash equivalents$253,062 $309,171 
     Accounts receivable, net597,560 521,059 
Short-term investments 34,466 52,300 
Prepaid expenses and other current assets69,647 63,664 
     Income tax receivable2,552 18,137 
           Total current assets957,287 964,331 
Accounts receivable, long-term portion12,665 13,937 
Operating lease right-of-use assets40,577 39,720 
Property and equipment, net177,907 181,193 
Other assets:
     Software development costs, net43,505 28,489 
     Goodwill2,449,638 2,359,674 
     Other intangibles, net1,032,786 1,052,493 
     Non-current investments26,464 46,353 
     Other non-current assets46,217 45,971 
Total assets$4,787,046 $4,732,161 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Accounts payable and accrued liabilities$264,908 $278,412 
Operating lease liabilities10,363 10,560 
     Deferred revenue528,588 510,529 
     Current portion of term loans30,000 30,000 
           Total current liabilities833,859 829,501 
Revolving line of credit— — 
Term loans639,464 718,511 
Convertible senior notes due 2026, net593,624 592,765 
Deferred revenue, long-term— 38 
Deferred income taxes216,947 228,085 
Operating lease liabilities, long-term36,018 36,336 
Other long-term liabilities8,807 2,893 
Total liabilities2,328,719 2,408,129 
Shareholders' equity$2,458,327 $2,324,032 
Total liabilities and shareholders' equity$4,787,046 $4,732,161 

TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Cash flows from operating activities:
    Net income$39,946 $25,530 $79,930 $62,506 
    Adjustments to reconcile net income to cash
    provided by operations:
      Depreciation and amortization37,717 39,876 75,866 60,976 
      Losses (gains) from sale of investments2 — (53)— 
      Share-based compensation expense25,800 25,175 51,079 50,899 
      Operating lease right-of-use assets expense2,022 2,488 5,104 4,034 
      Deferred income tax benefit(9,698)(3,163)(19,136)(6,430)
      Changes in operating assets and liabilities,
      exclusive of effects of acquired companies		(19,110)(110,253)(62,570)(120,629)
Net cash provided (used) by operating activities76,679 (20,347)130,220 51,356 
Cash flows from investing activities:
Additions to property and equipment(8,178)(7,659)(12,757)(14,223)
Purchase of marketable security investments— (15,299)(4,592)(68,054)
Proceeds and maturities from marketable security investments17,923 56,364 40,595 91,395 
Investment in software(8,516)(5,471)(16,463)(8,947)
Cost of acquisitions, net of cash acquired(615)(1,986,853)(117,313)(1,998,902)
Other181 (80)152 39 
Net cash provided (used) by investing activities795 (1,958,998)(110,378)(1,998,692)
Cash flows from financing activities:
Decrease in net borrowings on revolving line of credit— 65,000 — 65,000 
Payment on term loans(60,000)— (80,000)— 
Proceeds from term loans— 900,000 — 900,000 
Proceeds from issuance of convertible senior notes— — — 600,000 
Payment of debt issuance costs— (21,107)— (27,127)
Purchase of treasury shares— (12,975)— (12,975)
Proceeds from exercise of stock options, net of withheld shares for taxes upon equity award(12,152)11,286 (4,107)29,388 
Contributions from employee stock purchase plan4,478 3,162 8,156 6,200 
Net cash (used) provided by financing activities(67,674)945,366 (75,951)1,560,486 
Net increase (decrease) in cash and cash equivalents9,800 (1,033,979)(56,109)(386,850)
Cash and cash equivalents at beginning of period243,262 1,250,752 309,171 603,623 
Cash and cash equivalents at end of period$253,062 $216,773 $253,062 $216,773